Portfolio

Saturday, August 13, 2016

TLH Weekly Review

You have to treat investing like shopping at the mall. You buy when there is a sale. - The Long Haul Investor
Now I'll be the first to admit even I don't always buy when everything is on sale. In fact off the top of my head I can recall my Costco purchase where I nailed buying at the top in December 2015. Pat myself on the back for that one! Of course it's taken a full 8 months for the price to finally reach that level again. Ah mistakes, only good if you learn from them.

Now stocks have calmly been trading near all time highs, and the VIX sits near lows. Now I don't like to get complacent, and I know we will get another buying opportunity eventually. But patience is everything in this game. The market will test your patience at every extreme, and we must learn to control our emotions by letting the price come to us. I try to practice that as much as I can when buying up companies I love to hold long term. With some hiccups ;)!

Where Are the Jobs?

There is not much to report on the economic front. We had a JOLTS report and another Initial Claims report coming in under 300k. That makes it 75 weeks in a row Initial Claims for Unemployment is below that number. As a matter of fact according to the latest JOLTS report we have over 5.6 million positions available today! That's right dust off that resume, or get off the couch because companies are hiring and willing to fork over tons of cash for your time.

I'm personally getting tired of people claiming they have received a bad shake in this economy. The opportunity is out there. You have to go get it. You can't just blame the system, or attribute others success to luck or privilege. You also don't protest in front of your employer demanding they just fork over more money, or ask the government to force them(extortion). You work your tail off, and turn yourself into the employ they'd love to give a raise too. If that doesn't sound appealing to you then I'm sure there are still a few communist countries left that are taking applications. While you're at it ask Russia how Communism worked out for them. OK off my soapbox.

Retail sales came in later during the week and overall were flat, although excluding auto the number was down 0.3%. In other words automakers held up better than most everyone else. There was weakness in food/beverage, building materials, garden supplies, and clothing. Nothing to be concerned about to much. The prior report was revised upwards so until we see a string of bad reports I'd just keep a half-opened eye on this.

What Did That Banker Say?

In bigger central bank news The Bank of England decided to cut it's benchmark rate by 0.25% to exactly 0.25%. They expanded other easing measures which they nicely summed up in this fitting graph.

They then followed up their corporate bond buying with this little nugget.

"Purchases of corporate bonds could provide somewhat more stimulus than the same amount of gilt purchases...

...investors selling corporate debt to the Bank could be more likely to invest the money received in other corporate assets than those selling gilts."

It's veiled in there but this statement essentially means the BOE stated the private sector will be better at stimulating the economy than they are. Well then I guess why not take the 435 billion/mth about to be blown by the government and give it to the private sector? I guess that would make to much sense.

Portfolio Updates

I didn't post a weekly review last week, and I want to discuss some earnings from our portfolio in more detail.

Last week Church and Dwight(CHD) reported another nice quarter, and announced a 2-1 stock split. I've been hoping the shares would fall in price!!! Pun intended. The company has been doing great in all of its business lines. In fact they are doing so well they are part of the reason our other holding PG has had struggling detergent sales. That's fine with me and why I own both. The detergent category is a consistent money maker for both companies. Also lower commodity costs buoyed by a strong dollar is great for the company. Also CHD only gets about 15% of it's sales overseas. This is actually a good thing right now as the strong dollar will not clip sales at the same rate we see happening in other multi-nationals.

Cognizant Technology Solutions (CTSH) reported what I thought was a good quarter with sales up nearly 10% and an extra $1 billion added to their share buyback. Initially the market had its doubts and the stock roared higher on the day. Since then everything has fallen back to where it's been. I don't think that's an indictment of the company. The shares have pretty much traded between $50-$70 since November 2014. If sales growth keeps coming in strong the stock will have no choice but to go up. Also the company announced a $2.8 billion transfer of cash internationally and to the US. Now most of it appears to be share repurchase related. Although a part of me is thinking they have an acquisition in mind. I wouldn't be to surprised by that. There are a lot of smaller players in the field all looking to help business' work smarter with their technology. I can see an acquisition fueling more growth in the company as they become a dominant force in more sectors.

Universal Corp(UVV) reported what is normally their quietest quarter due to the seasonality of their business. Yet the shares popped that day and seem to be entrenching themselves in the upper 50's low 60's. I'll admit I regret not making another purchase below $55. I think this had more to do with investors trying to find a solid safe company and yield than anything right now. Understanding market sentiment is a brutal exercise, but that's my best guess for right now. I think confirmation of stable business trends just provided the fuel for hitting buy. What most people don't know is the company is establishing itself as one of the leading vaping liquid providers. This is offering investors the upside of tobacco companies without the same amount of risk since they only sell the raw materials.

HCP reported another nice quarter. The company is slowly starting to provide more details about the proposed spinoff of it's ManorCare assets. Seems to me a part of this recent run-up is due to investors realizing the potential of the company post spinoff. The company is also one of the few REIT's I see in the space still providing some decent value. I think that's what is sending people into the stock as it nears $40. Of course it's been outperformed the last few years by other companies, but considering we still have a 6-7% dividend yield on our purchase price we have some nice income protection from this pick. Still you have to consider that since it's February low the stock is up 60%!

WhiteWave Foods(WWAV) reported another great quarter. I won't get into details since their merger with Danone should be completed by EOY. It did make me just a little angry again at how well their brands are performing. I saw a lot of potential going forward, and I'll need to keep an eye out for another healthy food company. I don't plan on buying shares of Danone since I'm not a big dairy consumer myself for health reasons. I like to look at it this way. Would you see a cow drinking human milk? Didn't think so. I know WWAV had their own dairy operations, but I was willing to overlook that with all their other plant based offerings. The combined company gives me more dairy exposure than I'm comfortable with.

That's all for now. Have a great weekend! And don't forget to follow on Twitter

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